The Stillwell Company presents the following information:
Current annual credit sales: $36,000,000
Collection period: 2 months
Terms: net/40
Rate of return: 18%
The company is considering offering a 5/10, net/40 discount. It anticipates that 50 percent of its customers will take advantage of the discount. The collection period is expected to decrease to 1 month.
Required:
Evaluate whether or not the discount policy be implemented?